The One Mistake That Almost Got My House Foreclosed

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A rental property falling into foreclosure is a sad sign. “What happened to that landlord?” you might ask. Did a tenant do extensive damage, leaving them with a too burdensome repair bill? Did the landlord forget to pay their mortgage? What could have caused this? Well, if you’re like Ashley Kehr, someone else may have caused your home to (almost) slide into foreclosure, without you knowing.

Welcome back to this week’s Rookie Reply. Wait, scratch that. This week’s Rookie Confession, featuring our own Ashley Kehr! Many listeners know Ashley as a fast-moving, quick-thinking, real-life monopoly player, but in this episode, she opens up about a mistake that almost lost her multiple properties. It was an easy real estate mistake to make, but even veterans in the game get caught now and again. Want to avoid what happened to Ashley? Tune into this episode!

If you want Ashley and Tony to answer a real estate question, you can post in the Real Estate Rookie Facebook Group! Or, call us at the Rookie Request Line (1-888-5-ROOKIE).

Ashley:
This is Real Estate Rookie, episode 222.
My name is Ashley Kehr, and I’m here with my co-host Tony Robinson.

Tony:
And welcome to the Real Estate Rookie Podcast, where every week, twice a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey.
I want to start off today’s episode by shouting out some folks from the Rookie audience. We got another five star review. This one says, “I’m a small time real estate investor with one property, and I want to get to three to five. This podcast is amazing because they focus on the basics.”
So if you haven’t yet, leave us an honest rating and review on whatever podcast platform it is you’re listening to. The more reviews we get, the more folks we reach. The more folks we reach, the more folks we can help. And that is our ultimate goal.
So, with that out the way, Ashley Kehr, what’s up? What’s new? Tell me how things are.

Ashley:
Well, to be honest, today I’m going to use the Rookie Reply as my own confessional. I’ve had something just weigh me down on my shoulders and I just need to get it off my chest, and hopefully it will help some other people and everyone will realize that I am not perfect and bad things can happen. This bothered me so much, and I feel like I just need to get it out there in case it happens to someone else, that you know you’re not alone in this.
So at one point in time in the past year, I hired somebody to do my payables for the business.

Tony:
A bookkeeper.

Ashley:
Not even a bookkeeper, just paying the bills. So not even entering in any of the data, so just paying the bills. They would go and get my mail from the PO box. They would open the mail, they would scan in the mail, and I’d be able to look at it from there. And then they would write the check. They would bring the checks to my house that they wrote, have me look at them, compare them to the bill, sign them, and then they would make the envelope and mail them out.
So, first, I know you guys are all thinking that, “Well, why don’t you set all your things up on autodraft and automatic withdrawal?” Well, when you invest in small rural towns, sometimes there’s no online system. The only form of payment is walking into the place or mailing a check, unfortunately.
So there was things that would come in … or if a contractor, vendor, or something, something that’s an occasional occurrence, or the property tax bills, even the water bills. For in the small towns, the electric bills, they have their own utility company, and they only will mail out a bill and accept a check payment.
Anyways. So I got a letter in the mail about a month ago, and it said that my property taxes were not paid on one of my properties. In bold print across the top, foreclosure, property tax foreclosure, across … I seriously had a heart attack. At this moment I can’t even recall exactly what it said because all I did was panic inside. And it said: past due, nonpayment. These were due, I mean, like six months ago, that this happened.
And at the same exact date that I got that letter, I got an email from my bank that I have the loan with, saying, “Hey Ashley, just wondering what’s going on? This third-party company we check, to make sure things are paid on a property, said that the property taxes were not paid. What’s going on?”
Immediately, I felt embarrassment. I got sick to my stomach. I felt anger. What happened? So this person just did not do what they were supposed to do. So we went through the scanned documents, things like that. There was property taxes that were scanned in. Never paid. There was some that were never scanned in. Did she not get them? Things like that.
So I had to go through a lot of my accounts and just make sure everything was paid. Go through every property and pull up … And it ended up there was two properties that the property taxes were not paid for. Actually, no, I’m sorry, there was three. So one of them, what happened was that the property taxes were actually added to my next round of property taxes, and they were re-levied, they call it. So it was actually included into that bill. So they ended up being paid.
So what I did, was I went online to pay the property tax bill. And it says that they’re no longer accepting online payments. So I go into the town clerk in the small town and I go to pay the property tax bill. She’s like, “Oh no, I can only accept payments until June 30th.” And I was like, “Okay. How should I pay this?” And she goes, “Well, I don’t know. I’ve never been in this situation.” My embarrassment just overloaded even more. I’m like, “Oh my God.”

Tony:
“I’ve never had any bum landlords be this late on their property taxes.”

Ashley:
I know. And I was just like, “Okay. Yeah. I’m sorry, I’m not sure what to do. I was just asking for some guidance.” And she’s like, “Well, I guess I could Google it for you.” And this clerk is the one that you would write your check out to, to pay your property taxes. I just assumed they would know …

Tony:
Know what to do.

Ashley:
… what to do if someone’s paying late. So my embarrassment was awful. I had to work up the nerve to even go into it. I tried to make Darrell do it, but it would’ve had to wait another day until he was available because I didn’t want to walk in there. So it just got 10 times worse.
But what you ended up having to do was … she’s like, “You’ll have to go downtown Buffalo and you’ll have to pay it to the county now,” or whatever. So I got back in the car, I did my own Googling, and they actually accepted the payment online. So I didn’t even have to go into the clerk’s office, I could have paid it online. It was taken care of.
And then I learned that it’s actually two years of back taxes that you need before they will actually come and take your house and put it up for auction. But that was just a horrible, horrible feeling for me, is having that happen. So my biggest things that I learned, is that if you hire and outsource someone to do something … and I learned this with my property management company too … is that that doesn’t mean that you can forget about it. You need to still stay on top of things.
So that was my biggest takeaway from that. And if a bill is not paid, like your property taxes, it’s not the end of the world. But maybe I need to implement some kind of system, where I have a VA that’s going in and: check, check, check. Okay. All these property taxes are paid. Because if I don’t get a bill for something I don’t know to pay it. I can’t remember all of the property tax bills that should be coming in for my properties.
So if there’s anybody else out there who hired somebody that missed a payment, or maybe just forgot or something and missed a bill, I’m right there with you and felt the embarrassment.

Tony:
Yeah. Well, first, thank you for sharing, Ashley. I appreciate you sharing this super embarrassing story. I’m embarrassed for the both of us. I’m embarrassed that we’re even associated with one another now because I don’t want people to think that I don’t pay my property tax bills.
But, I guess, a couple questions. So, for me, I never have to worry about paying my property tax bills because my property taxes are impounded with my insurance payments for literally every single property. Is that not the case for your properties in New York?

Ashley:
So you have them in escrow?

Tony:
Yeah, all my payments are escrowed. Yeah.

Ashley:
Okay. So yeah, I have a lot of commercial lending on my properties, where they usually don’t require you to escrow your property taxes. So the nice thing about that is my monthly payment is low. Yes, I have to save up to make a payment, but a lot of my commercial loans, they don’t offer it or they don’t require it.

Tony:
Have you called to ask them if they would be able to do that on your behalf?

Ashley:
No, because I don’t know if I would actually want to. I mean, maybe now would be a good example. But I like that I’m just paying my insurance bill once. Because I have had it happen … this has actually happened twice now with a hard money lender … where I paid, at closing, for my insurance upfront, and they took the check and they were going to pay the insurance themselves, just for that one year, with the hard money lender.
I got notices stating that they have no record of the insurance, blah, blah, blah. So I’ve had a lot of issues with that recently. But I’m sure if they wanted to … I do have one commercial loan that has it in escrow, but that’s it.

Tony:
Yeah. For me, like you, there’s too many things going on, I think, for me to be able to keep track of that. So, for me, being able to escrow all that stuff has been super helpful.

Ashley:
Maybe that’s something I need to reevaluate going forward, is make sure that they are all escrowed. Yeah.

Tony:
Yeah. So my second question: did they send any notices before then about the nonpayment, and was this person who was in charge of that just not catching that? How do you think it went that far without it being brought to your attention?

Ashley:
So, actually, they would’ve received the bill a month before I let them go. So there was other things that were happening. So I had let them go, and then somebody else took over. And no, there was no bill received. This was the first notice that we got in the mail. And the bank had found out the same information at the same exact time. Which I thought was weird too.
But also, the next round of taxes for that property is coming up due now. So maybe they sent a notice before they re-levy it onto the next set of taxes for that property? So it’s like the school taxes are all coming up now. But yeah, I don’t know. But we thought that was really strange too, was that this was the first notice of it. And coming up too, is the big county auction for properties that they’ve taken for properties tax.

Tony:
So you’re like, “Oh no.”

Ashley:
I was like, “Oh my god, it’s going to be on the list. My LLC.” Oh my God, I was just sweating. People are probably Google satelliting the property, like, “Oh yeah, we want to bid on this one when it comes up to auction.”

Tony:
But luckily you avoided that.

Ashley:
Yeah. Yeah. Yeah.

Tony:
Crisis averted.
So I know you mentioned trust would verify, which I think is a big thing. And for folks, even if you just have one property, if you’re not doing everything yourself, I think there does have to be some kind of checks and balances in place to make sure that the things you’ve delegated to other people are actually getting done.
Just a quick backstory. So, for me, in my old W2 job, I was in a manager level position, so a lot of my information came secondhand from folks who were on my team. And obviously I had to trust them, that they were giving me the right stuff. But a lot of times I would just go back and I would just randomly pick different things that I would double-check, like if they were sending me data on how their shift perform for the last day, I would look at the email they sent me, but then I would just go into the system myself and pull some of that data to see if it all lined up.
So those little spot checks sometimes, I think, help catch some of those issues. And typically, what I’ve found, is that if you have someone that’s a low performing employee, if you find one mistake there’s probably some other mistakes in there as well. So it might be a telltale sign that there’s some other things you might want to dig into.

Ashley:
Yeah. And there’s probably things that are still going to come up from this too, I’m thinking.

Tony:
Yeah.

Ashley:
So we’ll see. But I had to get that off my chest. I had to do a real estate confessional of mistake.

Tony:
Yeah. And like you said, I think it’s helpful for the rookies to hear as well, because they hear our voice, they hear our stories every week. I know there’s this maybe misconception that things just always go right for us.

Ashley:
Yeah.

Tony:
But I shared my story about the Shreveport house that I lost money on. And things like this happen. As you’re building your business, things don’t always go right. So it’s not necessarily about maybe not letting those bad things happen, because sometimes it’s out of your control, but it’s about: how do you respond and how do you take those lessons and put them into your business so you can continue to get better?

Ashley:
And I think those are the people you want to have in your network too, who are open and honest about those things. While I was waiting for my kids to get off the bus today, I was on the phone with my friend Layka, who’s an investor in Seattle, and I was just telling her how some things were going wrong. We just found out this morning we have to put a new well on a property. And just every day there’s new costs, and it’s just like you’re moving money from the good properties to support the bad properties.

Tony:
Totally.

Ashley:
You never seem to have money because you’re always buying stuff.

Tony:
Buying stuff.

Ashley:
She’s like, “Yeah, you really get to enjoy real estate when you actually stop buying things and you just live off your rental income because you’re not putting it towards more properties.”
But she just rattled off all these things that are going wrong with her properties and then things that are going right with some. And it’s like, those are the investors you want to put yourself around, to share the good and the bad.

Tony:
I just want to share one thing that’s gone wrong in our business. So one of our cabins in Tennessee, summer is usually one of the busiest times of the year. Last summer we absolutely crushed it. And our second biggest cabin, there was a small leak, a little pinhole leak, that no one noticed. But we only started to notice because the floor was a little uneven and a floorboard started to pop up.
So our handyman went, he popped up the floorboard, and saw that it had just been leaking for who knows how long. So we had to cut out a big … I don’t know, like eight by eight square. And he replaced the subfloor and then put new flooring down. So this was two weeks ago.
We get a message from our cleaner on the same exact property, a few days ago, that they walk into that same lower level where we just replaced the floor and it’s soaked again. But this time it’s because the bathroom was clogged, the toilet in the bathroom down there was clogged, and literally re-damaged that whole section of floor that we just replaced.
So we had to block the calendar two weeks ago because of that first issue; we have to refund guests. And we have to do it again this week because of the second issue. So things that are totally out of our control. But like you said, it’s all-

Ashley:
And does that hurt getting super host, when you have to cancel people too?

Tony:
Yes, it definitely does. But if you have a cool guest and you just explain to them what happened, it’s like, “Hey, here’s what happened. You can stay if you want to. But just know this little section’s going to be unusable.” And if they cancel on their own, then you’re fine. But if they go to Airbnb and said I canceled on them, then automatically we would lose super host status.

Ashley:
Okay. I think that little tip is worth anyone listening to that episode because that’s great advice. Because my first thing was, wow, you had to cancel all these people. But no, you tell them what’s happening, and then you say, “I’ll give you a full refund if you choose to cancel,” so it’s on them. Ah, that’s a great idea.

Tony:
Yeah.

Ashley:
I mean, hopefully I don’t have any major …

Tony:
Yeah. Fingers crossed you never got to use that one.

Ashley:
Yeah. Yeah. Okay. Well, thank you guys so much for listening to my real estate confessional this week. We will be back on Wednesday with another Rookie Reply.
I am Ashley at WealthFromRentals, and he’s Tony at Tony J. Robinson. Don’t forget to check out our YouTube channel, Real Estate Rookie. And we’ll see you guys next time.

 

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.



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